A Health Savings Account, or HSA, is a fund that can be used to pay for eligible medical expenses not covered by an insurance plan. The account is typically funded with employees’ tax-exempt dollars or through employer contributions.
Unlike a Flexible Spending Account (FSA), an HSA rolls over unused funds.
Not everyone is eligible for an HSA. In order for someone to be eligible for an HSA the person must be:
- Covered by a high-deductible health plan (HDHP);
- Not covered under another medical plan that is not a HDHP;
- Not entitled to Medicare benefits; or
- Not eligible to be claimed on another person’s tax return.
An HSA has many benefits for your employees. Employees who use an HSA save money through tax benefits and through making smaller contributions to their medical plan premiums. In addition, an HSA gives employees greater control over their health care expenses.